Stock investors whipsawed
Investors over the past two weeks must have felt as if they were on a roller coaster or one of those oldfashioned scramblers that we would ride at the carnivals growing up!
Just when you are bracing yourself to be slammed in one direction, you have to shift gears and get ready to move sharply in the other! Stocks have performed like the “scrambler” over the past two weeks, falling precipitously on fears of an adverse outcome regarding the election this past Tuesday and then rising on what we believe is in response to a divided government.
In fact, over those ten trading days, the Dow Jones Industrial Average has moved more than one hundred points in either direction on nine of those ten trading days.
Why are investors feeling so anxious?
We believe that we can trace this high level of anxiety to three events, the first and most important in our mind, being the repercussions of the bear market that occurred in response to the COVID pandemic, the second being fears exaggerated by the media regarding the election and finally the fact that we all have “information age overload,” where all news can be delivered and responded to at the click of a mouse.
Investors can track their accounts daily, read what has influenced the market as it occurs (the latest count from the electoral college), read what news is out on the stocks they own as it is released, all of which results in the a myopic strategy, where you manage your accounts with a microscope, never seeing the positive trend being established for equities.
We suggest that stock investors heed two messages – 1) time tempers volatility and 2) make changes to your portfolio/asset allocation incrementally. This has worked well for our clients over the past thirty years and it makes sense that it will continue to work in the future.
We therefore suggest that you take a longer term look at the markets, perhaps longer than the minute-by-minute look that the business stations want you to take, and focus on what will most likely soon occur, calendar year 2021 in which we will most likely emerge from the grips of the pandemic, a stimulus package, an accommodative Federal Reserve, increasing corporate earnings in a relatively low inflationary environment.
This is a positive environment in which to invest.
Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, Please call (518) 279-1044.